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AP Microeconomics

Subjects : economics, ap
Instructions:
  • Answer 50 questions in 15 minutes.
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  • Match each statement with the correct term.
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This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. Occurs when LRAC is constant over a variety of plant sizes






2. In the case of a public good - some members of the community know that they can consume the public good while others provide for it. This results in a lack of private funding and forces the government to provide it






3. MUx / Px = MUy/Py or MUx/MUy = Px/Py






4. A legal minimum price below which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent surplus






5. Direct - purchased - out-of-pocket costs paid to resource suppliers provided by the entrepreneur






6. A per unit tax on production results in a vertical shift in the supply curve by the amount of the tax






7. The rate paid on the last dollar earned. This is found by taking the ratio of the change in taxes divided by the change in income






8. The case where economies of scale are so extensive that it is less costly for one firm to supply the entire range of demand






9. Measures the cost the firm incurs from using an additional unit of input. In a perfectly competitive labor market - MRC = Wage. In a monopsony labor market - the MRC > Wage






10. Occurs when there is no more incentive for firms to enter or exit. P=MR=MC=ATC and profit = 0






11. Entry of new firms shifts the cost curves for all firms upward






12. The least competitive market structure - characterized by a single producer - with no close substitutes - barriers to entry - and price making power






13. The change in total product resulting from a change in the labor input. MPL = dTPL/dL - or the slope of total product






14. The sum of consumer surplus and producer surplus






15. Demand for a resource like labor is derived from the demand for the goods produced by the resource






16. Models where firms agree to mutually improve their situation






17. All firms maximize profit by producing where MR = MC






18. The price of a good measured in units of currency






19. The philosophy that a citizen should receive a share of economic resources proportional to the marginal revenue product of his or her productivity






20. The difference between the price received and the marginal cost of producing the good. It is the area above the supply curve and under the price






21. The total quantity - or total output of a good produced at each quantity of labor employed






22. When firms focus their resources on production of goods for which they have comparative advantage






23. Additional costs to society not captured by the market supply curve from the production of a good - result in a price that is too low and a market quantity that is too high. Resources are overallocated to the production of this good






24. Total revenue rises with a price increase if demand is price inelastic and falls with a price increase if demand is price elastic






25. The marginal utility from consumption of more and more of that item falls over time






26. Two goods are consumer complements if they provide more utility when consumed together than when consumed separately






27. Product demand - productivity - prices of other resources - and complementary resources






28. Factors of production - 4 categories: labor - physical capital - land/natural resources - and entrepreneurial ability






29. Pmc < MR = MC and Pmc > minimum ATC so outcome is not efficient - but profit = 0.






30. Production of maximum output for a given level of technology and resources. All points on the PPF are productively efficient






31. Es = (%dQs) / (%dPrice)






32. An economic system based upon the fundamentals of private property - freedom - self-interest - and prices






33. A period of time too short to change the size of the plant - but many other - more variable resources can be changed to meet demand






34. The imbalance between limited productive resources and unlimited human wants






35. Holding all else equal - when the price of a good rises - suppliers increase their quantity supplied for that good






36. The downward part of the LRAC curve where LRAC falls as plan size increases. This is the result of specialization - lower cost of inputs - or other efficiencies of larger scale.






37. Exists when the production of a good creates utility for third parties not directly involved in the consumption of production of the good






38. Occurs when an economy's production possibilities increase. This can be a result of more resources - better resources - or improvements in technology.






39. The proportion of the tax paid by the consumers in the form of a higher price for the taxed good is greater if demand for the good is inelastic and supply is elastic






40. The study of how people - firms - and societies use their scarce productive resources to best satisfy their unlimited material wants.






41. Substitutes - cost as percentage of income - and time to adjust to price changes all influence price elasticity






42. A measure of industry market power. Sum the market share of the four largest firms and a ratio above 40% is a good indicator of oligopoly






43. Goods that are both nonrival and nonexcludable. One person's consumption does not prevent another from also consuming that good and if it is provided to some - it is necessarily provided to all - even if they do not pay for that good






44. Holding all else equal - when the price of a good rises - consumers decrease their quantity demanded for that good






45. Has opposite effect of an excise tax - as it lowers the marginal cost of production - forcing the supply curve down






46. Another way of saying that firms are earning zero economic profits or a fair rate of return on invested resources






47. The more of a good that is produced - the greater the opportunity cost of producing the next unit of that good






48. The output where ATC is minimized and economic profit is zero






49. The mechanism for combining production resources - with existing technology - into finished goods and services






50. Models where firms are competitive rivals seeking to gain at the expense of their rivals







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